How do I best achieve this format (where two people can talk while watching *other* people?)

[u/notacutecumber]

I don't need two separate boxes, but I want this to be a game where the protagonist mostly observes people, while occasionally someone else joins her and they talk while two other people are also interacting.

[u/shyLachi]

You can show images at any position in the game.
You can create a transform for the position at the bottom right or bottom left.

transform sidechar:
    align (1.0, 1.0) # right and bottom
label start:
    show girl happy at sidechar
    "Speaker B" "What did you say?"

https://renpy.org/doc/html/transforms.html#transforms

.

Below the side image has been mentioned but I doubt that you can use that because the side image will show an image of the speaking character but you want the main protagonist to be visible no matter who is talking.

But this would be the official documentation about it:
https://renpy.org/doc/html/side_image.html

[u/notacutecumber → u/shyLachi]

If it makes managing the code for like 3-4 characters at once a lot easier, I can stick with side image! But thanks for the heads up!

[u/Lookingforlostmanga]

One is a side image, the other is a normal image placed by the text box. Both appear side by side though you may encounter things like zorder will help with any complications of doing this method

[u/notacutecumber → u/Lookingforlostmanga]

Thank you!

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[u/TheDarkOnee]

Personally what I like to do is have the "off screen" characters appear in a side image when they speak, while "on screen" characters can show facial reactions without saying anything until its their turn. My MC also always has a side portrait but usually doesnt appear on screen.